I'm guessing that none of the workers you're referring to are IIT graduates. I agree that American developers face little competition from the middle/lower end of developers in India. But the top developers in India (eg, the IIT grads and Google-India devs), in terms of raw talent and job performance, would easily out-compete the average American developer, while still being happy with a lower salary. This is where the physical-proximity-perks that American developers currently enjoy, really make a big difference.